Providing Value in the World of College Athletics

Publication Date: July 1, 2021

Many institutions have an athletics department (Division I, II or III), which presents a myriad of challenges for both institutional administrators and auditors. In addition to the traditional “big three” risks for athletics departments (student-athlete recruiting, financial aid and eligibility), societal pressures have created a plethora of dynamic risks:  

• Name, Image and Likeness (NIL) – National Collegiate Athletics Administration (NCAA) regulations will now allow student-athletes the opportunity to make money from their name, image or likeness. With this new opportunity come potential risks like: (a) gauging fair market compensation for athletes who are contracted under NIL, (b) agent participation and regulation, and (c) differences in contracts for alchohol and gambling at private versus public schools.  
• Knight Commission Guidance – This is a commission of university presidents, former athletic directors and other leaders. Risks are related to changes in their guidance in December 2020, which included recommending that:
  • A new entity be created, independent of the NCAA and funded by the College Football Playoff Committee (CFP), to oversee football in the Football Bowl Subdivision (FBS) and manage all related issues (e.g. athlete education, health and safety, revenue distribution, litigation, eligibility and enforcement).
  • The NCAA continues to govern all other sports, including football in the Football Championship Subdivision (FCS) and men’s basketball, under a reorganized governance system that would establish equal voting representation for all Division I conferences.
  • The NCAA and the new FBS football entity adopt governing principles to “maintain college athletics as a public trust, rooted in the mission of higher education” and prioritize student athletes’ education, health, safety and success. [1]

• COVID Relief – Many institutions received federal funds from the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Risks associated with CARES relief include providing funding to student athletes who are ineligible and using money to upgrade athletic facilities. 
• Financial Pressures Due to the COVID-19 Pandemic – The financial risks associated with the COVID-19 Pandemic include: a) loss of ticket revenue, b) increased financial aid obligations due to the NCAA granting athletes an extra year of eligibility, and c) potential increase of operational expenditures due to the need for more cleaning staff, contract tracing and testing.
• Student-Athlete Health –  Potential student athlete health risks may be physical, arising from overtraining or unsafe practicing, or mental, due to academic and athletic pressures. 
• Vaccine Distribution – There is concern over the equity of vaccine distribution and whether  athletes and coaches will be prioritized over other populations.
• Donor Compliance – The athletics department must utilize funds in accordance with donor restrictions. Additionally donors may put pressure on the institution’s administration to retain unpopular coaches, not move to a desired conference, play or not play a particular rival, or change longtime traditions.
• Concession Vendors – The athletics department may not always receive its agreed-upon share of revenues from third-party concession contracts.
• Construction Audits – Construction projects generate significant capital expenditures and may encounter contract compliance issues.
• Conflict of Interest – Coaches may not report all camps for which they are compensated.
• Minors on Campus – Minors coming onto campus for athletics camps must be protected from physical, sexual and mental abuse. 
• Athletics Fees – The athletics department should be compared to its conference/national peers to determine how fees are utilized and reported. [2] 
• Team Roster Management – Due to new rules, student athletes may transfer without any penalities. 

So Where Does Internal Audit Begin?

Develop Relationships with Key Stakeholders in Athletics

Set up a periodic meeting with the Athletic Director (AD) to determine if there are emerging risks or current areas of concern. 

• Work on your relationship with the school’s Athletics Compliance Office (ACO). Ideally, aim to meet with the ACO at least once a quarter. This may be a challenge and will likely take a considerable amount of effort. To achieve this goal, let them know how it benefits them. For example, identify opportunities for improved controls that are not only more effective, but also more efficient for the ACO to monitor.  
• Set up a periodic meeting with the Athletic Director (AD) to determine if there are emerging risks or current areas of concern. 
• Talk to your institution’s athletics academic staff to gain insight into potential risk areas around eligibility and financial aid. This discussion may include staff members from the Offices of the Registrar, Admissions and Financial Aid. 

Have conversations with coaches and student-athletes to gain insight into additional risks.

• Have conversations with coaches and student-athletes to gain insight into additional risks. For example, it may become apparent that the institution lacks adequate athletics compliance training.
• Finally, it is vital to build a relationship with the school’s faculty athletic representative and, if possible, obtain a seat within the school’s athletic council. 

​Use Other Athletic Resources

• Contact ACUA members who have athletics departments or reach out to institutional audit shops within your athletic conference. Keep abreast of collegiate information through newspaper sites (e.g. local or large city newspapers) and other sports media (e.g. ESPN and Yahoo). These sites may provide straightforward explanations of new NCAA regulations.
• Periodically refer to the following online resources. They may be helpful in identifying significant risks to your institution:
  • NCAA media website
  • AthleticDirectorU
  • Compliance section of NCAA website
  • NCAA Regional Rules Seminars
  • The National Association for Athletic Compliance (NAAC) Reasonable Standards 
• ACUA also has valuable resources available:
  • NCAA Compliance: Eligibility, Financial Aid, and Recruiting Kick Starter
  • NCAA Division I and II compliance audit guides

Tools for Athletics Work

Auditing athletics compliance through the use of athletics compliance software (ACS) can help to automate the process. Many athletics compliance departments use Front Rush ACS to help manage their athletics compliance activities. Internal audit may explore utilizing their athletics compliance department’s ACS, which has the following benefits: 

• Athletics compliance will not need to use additional resources to provide documentation for audits.
• Internal Audit can assist with some of the work required of athletics compliance. 
• Internal Audit may identify gaps in internal controls and provide ideas for increasing effectiveness.

Additionally, NCAA Compliance Assistant assists athletics administrators with the management of student-athlete information to ensure compliance with NCAA regulations. This tool houses information on financial aid, eligibility and roster sizes, and may be downloaded and utilized by Internal Audit for analytical testing.

Data Analytics

As previously mentioned, data may be downloaded from NCAA Compliance Assistant, student information systems (e.g. Banner) and the institutional financial system. Consider performing the following procedures:

• Test individual and team equivalencies with financial aid data. This may include working with Financial Aid and the ACO to obtain information on cost of attendance and aid not counted as athletic aid.
• For eligibility testing, you may use the student information system to find courses where larger pools of athletes are enrolled. Subsequently, test their grades against the general student population for those courses.    
• Compare student-athlete rosters in NCAA Compliance Assistant to student-athlete rosters in the student information system.
• Within the student information system, review incoming freshmen and transfer admissions data to determine if student-athletes are admitted in accordance with institutional standards. Assess the validity of exceptions granted to student-athletes for admission after stated deadlines.
• Download financial data for athletics and compare with previous year(s) to determine if there are significant variances and whether the variances are reasonable. 

Conclusion

We know the world of college athletics is important and makes significant contributions to our colleges and universities. These contributions include increases in donations, financial aid, brand recognition and camaraderie. However, these benefits and financial commitments are accompanied by additional risk. As Yogi Berra once said: “The future ain’t what it used to be.” By helping our colleges and universities address the risks of college athletics, Internal Audit has the opportunity to be creative, stay ahead of the curve and provide value.

References

1. Andrews, Katlyn (Dec. 17, 2020). Knight Commission report – key implications of a FBS and NCAA split., Baker Tilly, From:  https://www.bakertilly.com/insights/knight-commission-report-key-implications-of-a-fbs-ncaa-separation 
2. Connect ACUA e-mail (Dec. 10, 2020), Re: Athletics Brainstorming, Summary by Brian Daniels. 

Note: My sincere thanks to members of the ACUA College and University Journal editorial staff (Jackie Pascoe, James Merritt and Paul Harris) for their editorial contributions.